SD PUC eyes changes in grain sales

The South Dakota Public Utilities Commission decided June 4 it must try to further fix South Dakota’s regulations for sales of grains, sorghums, beans and oil seeds.

By:
Bob Mercer , Forum News Service

PIERRE, S.D. — The South Dakota Public Utilities Commission decided June 4 it must try to further fix South Dakota’s regulations for sales of grains, sorghums, beans and oil seeds.

The commission ordered that a rule-making docket be opened and a hearing be held at some point in July, so that sellers and buyers can continue to engage in voluntary credit sales.

The common practice allows harvested crops to change hands immediately under a verbal agreement while price contracts are signed at later dates.

A circuit judge ruled in April the voluntary-credit contracts must be signed by both parties at an agreed price within 30 days of delivery.

Otherwise, it is a cash sale and a check must be written by the buyer to the seller after the 30 days pass.

The PUC’s action to open a docket again comes just months after the Legislature rewrote state laws on grain transactions.

The Legislature approved changes in law at the PUC’s request in the wake of the 2012 financial failure of Anderson Seed Redfield, S.D.

The PUC, in turn, adopted new rules this spring to comply with the new laws.

But the PUC wants to find a short-term solution, after a judge disagreed with the commission’s interpretation of the requirements for a voluntary credit sale.

Circuit Judge Tony Portra, of Aberdeen, S.D., said the ultimate remedy rests with the Legislature further changing the law. State lawmakers don’t meet in regular session again until January 2014.

PUC member Chris Nelson said he wants the commission to adopt some additional new rules that could cover at least the later months of the harvest season this year.

Nelson acknowledged that under the best timetable, the new rules won’t take effect until Sept. 8 at the earliest and thereby miss some of the 2013 harvests.

Decision driver

Driving the commission’s latest action is a ruling from Judge Portra in the Anderson Seed case. He ruled in favor of dairyman Ray Martinmaas, of Orient, S.D., one of the many farmers who were owed a total of $2.6 million by Anderson Seed.

The only money that went back to farmers came from a $100,000 security bond that Anderson Seed had posted with the PUC as part of its South Dakota license.

Martinmaas lost $47,000. The PUC originally found that Martinmaas shouldn’t share in proceeds from the security bond that Anderson Seed had posted because he had engaged in a voluntary credit sale. The bond didn’t apply to voluntary credit sales.

But the judge said Martinmaas didn’t actually have a voluntary credit sale agreement with Anderson Seed. The contract was signed by an Anderson Seed official but Martinmaas hadn’t signed it. The judge ruled it had to be signed by both sides to be valid.

The South Dakota Grain and Feed Association asked the PUC to waive a portion of the commission’s rules so that in the future only the buyer would need to sign the agreement.

The commission voted 3-0 to reject the waiver request because it would have left sellers such as farmers with less protection.

The commission instead decided to open the new docket to consider what could be done instead.

The grain and feed association has proposed a rule that would give farmers and other sellers two days to object to a signed contract from a buyer.

That will be one of two topics in the new PUC docket.

The other topic was the revelation June 4 by the association’s president, Jerry Cope, of Dakota Mill and Grain in Rapid City, that the PUC’s grain-warehouse division doesn’t follow a standard method to determine prices for voluntary credit agreements.

The division’s inspectors look at the agreements as part of determining a warehouse’s financial soundness.

The division’s director, Jim Mehlhaff, acknowledged that Cope’s general statement was true. Mehlhaff said some things that have been done in recent months for determining those prices previously weren’t allowed.

Mehlhaff said there isn’t anything in state law or PUC rules addressing what should be done.

“We’re in fast current on this because there is no statute or rule that directs exactly where you go,” Mehlhaff said.

The judge’s ruling opened conflicts on timing and pricing of grain, according to Cope.

“If we have to wait until the farmer actually comes in the door to sign the contract, they’re at risk. We’re at risk,” Cope said.

The only time there is a problem is when the farmer chooses to not sign a contract, according to commissioner Nelson.

Nelson said there is “a much-heightened urgency” until Sept. 8 for farmers to sign contracts.

In general, farmers need to be sent a contract, have an opportunity to reject it and ultimately still have a signed contract, he said.